Chinese single-listed ADRs: returns and volatility

Abstract

Purpose

Single-listed American depositary receipts (ADRs) are traded in US markets, while their underlying share is not listed in the firm’s home market. The purpose of this paper is to empirically examine the factors affecting the returns and volatility of a sample of Chinese single-listed ADRs, in comparison with traditional Chinese ADRs.

Design/methodology/approach

The methods used in this paper are similar to those used in the examination of traditional or dual-listed Chinese ADRs. However, motivated by the very nature of single-listed ADRs, the authors estimate a base model which includes factors from the two presumably most important markets for single-listed Chinese ADRs (i.e. the Chinese and US markets). In all of the estimations, the authors follow a two-step procedure. First, the authors estimate a GARCH(1,1) model with the mean equation modeled as an AR(p) process and from those models estimate GARCH (conditional) variances.

Findings

In line with the evidence on traditional Chinese ADRs, the authors find that both the Chinese and the US markets are important predictors of single-listed ADR returns. The results are robust to variations in the model specifications.

Originality/value

Single-listed ADR return behavior is still an under-researched topic. In this paper, the authors contribute to the literature on Chinese single-listed ADRs by empirically examining the determinants of their mean return and volatility.

Citation

Rodríguez, J. and Toledo, W. (2015), "Chinese single-listed ADRs: returns and volatility", International Journal of Managerial Finance, Vol. 11 No. 4, pp. 480-502. https://doi.org/10.1108/IJMF-07-2014-0103